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Executive Summary

Bharat Petroleum Corporation Limited (BPCL), a Govt. of India Enterprise, is the highest ranked Indian public sector company in the prestigious Fortune ‘Global 500’ listing. This report focuses to implement the transportation problem which is a category of linear programming to deal with BPCL’s petroleum distribution from several points of supply(refineries) to a number of demand points (Indian States). The cost of bulk transportation of petroleum products in India is part of petroleum products price build-up or ex-pump price or retail price therefore its reduction will result in reduction of prices of general goods and services. Hence, it is imperative to try and minimize the cost of transportation. The study applies the concepts of the transportation problem to BPCL and develops a model which has an objective function of distance and cost reduction. This study gives us insights about the importance of the geographical location of all the three refineries.

Introduction and Background

Bharat Petroleum Corporation Limited (BPCL) is India’s ‘best performing’ Maharatna public-sector enterprise operating in the Oil and Gas sector. BPCL started its journey under the name of Bharat Refineries Ltd. which was formed when Government of India undertook BPCL enterprises through seven strategic business segments namely Refinery, Retail, Lubricants, Industrial and Commercial, Liquefied Petroleum Gas, Aviation, and Gas. It offers a comprehensive range of products from lubricants, solvents, petrochemicals to aviation fuel. The Company is head-quartered in Mumbai, Maharashtra, India with operations across the nation.

Today Bharat Petroleum Corporation Limited operates three oil refineries in India namely- Mumbai, Kochi and Bina. The Bina refinery is owned and operated by ‘Bharat Omen Refineries Ltd’ which is a fully owned subsidiary of BPCL.

Problem

While transporting such a huge amount of oil products in such a big landmass of India, it is essential to optimize the total efforts from leaving origins (refineries) until reaching its final destinations. In this paper, a linear programming transportation model is developed to satisfy the oil transportation optimization problem at BPCL. Specifically, it is dedicated to obtain an optimal allocation between the three refineries and the capital of all the 29 states in India by setting distance and cost minimization as the objective function.

The adopted approach is to use the Linear Programming Transportation Optimization Approach to minimize the objective function.

Conclusion

Bharat Petroleum being a leading oil and gas corporation which is under the ownership of The Ministry of Petroleum and Natural Gas of India has an immense responsibility to cater to the rising consumption of petroleum in every nook and corner of India. The transportation cost is an important element of the total cost structure for any oil and gas refinery. This transportation model enlightens us about the importance of considering the distance while formulating a distribution strategy. The outcome of this model reveals that proper routing of transportation vehicles can save costs. One can add additional constraints to this model to increase its precision in practice. It is envisioned that the scope of the analysis could further include individual costs of all vehicle routes.

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